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Employers Can't Offer Employees Choice of Cash or Health Plan Enrollment

01.26.2015

money and stethoscope 2, health careIn November, the Departments of Labor, Treasury, and Health and Human Services issued additional FAQs regarding whether an employer may make a cash reimbursement of an employee’s purchase of an individual health insurance policy without violating the Affordable Care Act (ACA). The FAQs also address whether an employer may offer high-claims-risk employees the choice of cash or enrollment in its health plan.

Although the FAQs reiterate the agencies’ general opposition to employer funding of individual policies, the third question takes direct aim at a specific plan design that some vendors are marketing. Under this design, employees buy individual insurance policies — and may even receive premium tax credits for coverage bought via a Health Insurance Marketplace — and then have their individual policy premiums reimbursed by their employer tax-free. The agencies emphasize that these employer reimbursement arrangements aren’t permissible for two reasons.

First, they themselves are group health plans. Therefore, employees participating in such arrangements are ineligible for premium tax credits for Health Insurance Marketplace coverage. Second, such arrangements can’t be integrated with individual policies to satisfy the ACA and, therefore, will violate the law’s prohibition on annual dollar limits for essential health benefits, as well as its requirement to provide first-dollar coverage for preventive services. The FAQs emphasize that noncompliant arrangements can trigger $100 per employee / per day penalties.

Ron Present, CALA, CNHA, LNHA, FACHCAHave more questions about Health Care Reform? Contact Ron Present, Health Care Industry Group Leader, at 314.983.1358 or rpresent@bswllc.com.

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